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Thursday, April 22, 2010

What is the Colour of Money?

It's sound like a silly question - "What's money?". Charles Dickens in his book 'Dombey and Son' that tell about the conversation between father (Paul Dombey and his son). Mr. Dombey in the book tells his son that money is composed of coins and banknotes. It is a sensible answer, but little Paul is not satisfied and wants to know what money really is.

This is a difficult question. Money has been compared to happiness, a bridge, and time ('time is money'). Money can be compared to anything and everything because it can be translated into anything or everything.Money can move mountains, cause people to walk on the moon or cure the sick. Money appears green in one country and blue in another. There is a real money and there is a fake money. Money comes in all colors and cab be found everywhere. According to what we know money has been in existence for a long time. In ancient Greece the coins issued were made of a metal known as electrum. The value of the coin was the same as its weight; the bigger the coin the more valuable it was. Other societies developed different currencies. In some places the cowrie acted as money, in others it was the cow. The Roman soldiers who were living far away from Rome were paid in salt because salt was not commonly available. The English word 'salary' comes from the custom of making payments in salt.

However, the Greek rules quickly realized that the value of a coin could be changed. This was not done by adding or substracting from its weight, but by stamping new words and pictures on the coin and announcing that it had a new value. Coins have been losing their value ever since.

The next big change in Western money came with the introduction of paper money. People were very slow to accept that you could make money from something as weak as paper. When Marco Polo told Europe that the Grand Khan in China issued paper money, people said he was telling lies. In the nineteenth century workers refused to be paid in blanknotes and shopkeepers refused to accept them as payment for goods and commodities.

However, the times change. In today's global economy, it would be difficult to find anybody who would refuse the offer of a dollar banknote. Neither does anybody seem to mind that most of the world's money is now in the form of electronic units on computers screens. It is strange that money which began as a metal called electrum should end up as electricity.

Money works because, as members of society, we all agree that it should work; outside of society money does not make sense. Imagines if you were alone on an island and you saw two boxes in the sea. One box contains millions of dollars, the other box contains various tools such as a saw, knives, etc., and agricultural seeds. You anly have time to remove one box because the tide is carrying them away. Which box would you hold on to?